Maryland Enacts ‘All-Payer’ Health Care Payment Model

Published September 12, 2018

The program, called the Total Cost of Care All-Payer Model, is expected to save $1 billion over five years, Hogan’s office stated in a press release about the partnership. Maryland operates an all-payer hospital rate system under a 36-year-old Medicare waiver that allows it to set hospital care rates and standardize insurer rates. The program applies to beneficiaries of Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).

“Maryland’s all-payer rate setting system for hospital services presents an opportunity for Maryland and CMS to test whether an all-payer system for hospital payment that is accountable for the total hospital cost of care on a per capita basis is an effective model for advancing better care, better health and reduced costs,” CMS states in its webpage about the model.

“This model is a step toward aligning the entire delivery system toward paying for value over volume,” Seema Verma, CMS administrator, said in the governor’s press release regarding the July 9 agreement. “Maryland has led the way by adopting the first alternative payment model to shift hospital payments to full global budgets. Success under this new model will require both hospitals and physicians to be equally committed to payment transformation and care redesign.”

The Maryland/CMS agreement includes programs to coordinate care across hospital and nonhospital settings, including mental health and long-term care; a Maryland Primary Care Program; incentives for providers to meet a range of new quality and care improvement goals; and community resources concentrated on population health problems such as opioid abuse, diabetes, hypertension, and other chronic conditions.

‘Essentially Fixing Hospital Prices’

Devon Herrick, a health economist and policy adviser to The Heartland Institute, which publishes Health Care News, says Maryland’s All-Payer system is subject to the same problems as other government payment schemes.

“Maryland is essentially fixing hospital prices and regulating what third-party payers reimburse hospitals for the same service,” Herrick said. “Within the same hospital, the prices all third parties reimburse are very similar, although fees can vary from one hospital to another. Although this may seem beneficial, it runs the risk of having bureaucrats set prices based on bad information or influenced by hospital lobbyists.”


Joshua Archambault, a senior fellow for health care policy at The Pioneer Institute, says what Maryland is doing is trying another set cost-containment strategies to see if the state can improve what it’s already doing, instead of implementing real reforms.

“They’re trying to pay less for health care, which is their stated goal,” Archambault said. “They started by setting prices, by saying everyone is going to get paid this amount. Then they twisted it the last go-round and said, ‘OK, we’re no longer going to pay this set price range for every MRI; instead, we’re going to set up a budget for this patient of this age, and this sickness, and we’re going to give you this amount of money to take care of them.

“As far as alternatives, there are people working in the Maryland Heath Care program that say, ‘Well, we don’t really think about health care [from a free-market perspective],'” Archambault said. “So then the question becomes, ‘Is the Maryland approach more effective than trying something else like Right to Shop, which is basically paying patients to shop for lower cost care? Is that more effective at drawing down prices than price controls?’ I think over the next couple of years, we will find out.”

Cost-Containment Exercises

Archambault says other states are unlikely to want to emulate Maryland’s new payment system.

“I don’t think we’re going to see other states jump on board and follow what Maryland is doing with premium relief, price controls, and price-setting schemes,” Archambault said. “They’ve incrementally changed the Maryland plan over the last few years by trying to pay with a budget-per-patient model instead of a fee-for-service plan. It really isn’t being heralded as a huge change. … It’s just a little bit different. They’ve been doing this since the 1970s, so it should tell you something that no other state has followed Maryland’s lead.”



“Maryland All-Payer Model,” Centers for Medicare and Medicaid Services,